Third Party Liability under the FWA

In a landmark Court ruling last year, EZY Accounting (“EZY”) was found to have contravened the Fair Work Act 2009 (Cth) (theAct”) by its involvement in its client, a Japanese fast food restaurant, underpaying its staff in breach of the relevant Award (Fair Work Ombudsman v Blue Impression Pty Ltd [2017] FCCA 810).

We first brought you news of the EZY case while it was still underway in late 2016. In 2017, the Court in the first instance gave judgment against EZY. On 20 August 2018, three Justices of the Federal Court of Australia roundly rejected EZY’s appeal against that finding (EZY Accounting 123 Pty Ltd v Fair Work Ombudsman [2018] FCAFC 134).

Section 550 of the Act provides that a person who is involved in a contravention of a civil remedy provision by another person is taken to have also contravened that provision. Put simply, if an employer has contravened the Act, a third party (accountant or other adviser) may also be found liable if they were involved in the contravention.  

A broad range of conduct falls within the ambit of section 550 of the Act. Any of the following conduct will involve the adviser in the employer’s contravention of the Act: 

- Aiding, abetting, counselling or procuring the contravention;

- Inducing the contravention, whether by threats or promises or otherwise;

- Being, by act or omission, directly or indirectly, knowingly concerned in or party to the contravention; or

- Conspiring with others to effect the contravention. 

Whilst an employer can be penalised up to $63,000 per contravention, a manager of the employer can be liable for up to $12,600 per contravention. In this case, EZY was ultimately ordered, on appeal, to pay a penalty in the sum of $51,330 plus costs!

In drawing on the findings made in the first instance, the Full Court of the Federal Court of Australia found that: 

- Mr Lau, of EZY, was aware that the Award provided for a base rate of pay for ordinary hours and for additional penalty rates and allowances;

- Mr Lau knew that Blue Impression Pty Ltd had been underpaying its employees because he knew that “the rates in [EZY's] payroll system were not sufficient to allow [Blue Impression] to comply with the obligations imposed on it by the Award”; and

- “as a matter of inference”, Mr Lau knew that Blue Impression Pty Ltd “was underpaying its employees (and not meeting the requirements of the Award)”. 

EZY, through its employee Mr Lau, was found to be knowingly concerned in a contravention of the Act and was liable accordingly.

It is worthwhile to note that sections 45 and 50 of the Act, which relate to contraventions of Modern Awards and enterprise agreements respectively, do not require a person to be aware that they are in contravention of the Act in order to establish a breach. It follows that merely knowing the rates being paid to the employees can constitute a breach, provided that there is a relevant act or omission.

This case stands as a strong warning to all advisors that they may be liable if they allow themselves to be knowingly concerned in a contravention of the Act. Accountants, lawyers, HR professionals, amongst others, could all potentially be captured. Advisors should be proactive in taking measures to reduce their exposure to liability, including by: 

- reviewing recent case law and relevant awards to better understand their potential exposure and pitfalls;

- enquiring as to any irregularities identified particularly in administrative processes and payroll systems;

- engaging with their clients (employers) and addressing concerns relating to workplace conditions and employee entitlements. 

Gavin Parsons and Associates can assist you with any questions you have regarding your legal obligations under employment laws. Contact us on (02) 9262 4471 for a free no obligation consultation today.

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Date posted: 2018-11-27